Milo Bogaerts, CEO UK and Ireland at Euler Hermes, the world’s largest credit insurance company, shares his tips for successful exporting.
More UK businesses are looking overseas to boost sales, diversify their customer base and drive bigger profits. The volume of products and services sold abroad grew by 15 per cent in the last 12 months as firms benefitted from a weak pound and demand from strengthening economies across the Eurozone. Manufacturers had a particularly fruitful end to the year, with export order books reaching levels not seen for 30 years.
Boosting exports is high on the government agenda. In Scotland, five local export partnerships (LEPs) are set to be launched with the goal of boosting the number of SMEs, with little or no previous experience of exporting, reaching customers in new international markets. The Welsh Assembly has announced it will open new offices in its key export destinations, including, France, Germany and Canada, to boost opportunities for businesses.
But selling overseas does not come without risks and there are five steps areas, often overlooked, which SMEs should consider first.
1. Track the right information
Firstly, firms should look to find out as much as possible about the companies they are planning on doing business with, from details about their finances to current customers. This will help firms build a profile of potential new clients, which help enable them to make informed decisions about where and whom to trade with. It can also help to have a wider understanding of the economic issues at play within a particular market.
2. Keep an eye on trade barrier changes
The number of protectionist measures is at a record level with 400 news implemented around the globe last year. Businesses should monitor new tariff and non-tariff barriers given the impact they can have on sales activity and invoice collection. For example, more economies are bringing in national standards on food safety and quality to help safeguard local producers, which could bring sudden cost increases.
3. Monitor geo-political risk
Political instability can often result in contractors defaulting on payments, government policy change – such as local trade embargos – transfer exchange blockages and property confiscation. Taking the Ukrainian crisis an example, import embargos were imposed on Russia which had significant impacts on the supply chains of firms trading with the country.
4. Get your legalities in order
Small firms can make the mistake of taking a ‘cross that bridge when we come to it’ approach on legal issues. Major differences in law exist between different markets and countries so firms need to understand of how these could affect their ability to export or recover revenue before embarking on any expansion abroad. The same can be said for general supplier terms and conditions, and firms must ensure they modify them dependent on the market they are exporting to.
5. Being alert of different payment cultures
The marked variations in accepted payment culture between countries often catch businesses out. Longer and more segmented payment terms need to be accounted for – even in fast turnaround sectors like the food and retail – and differences may mean firms need to reassess their working capital needs and protecting their open account receivables. Days Sales Outstanding measures the gap between providing goods and being paid for them and there are great variations accepted practice. Businesses can expect new clients in Turkey, Italy and Greece to take more than 80 days to pay for goods or services, for example, compared with 52 days in the UK.
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